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The U.S. government is scrutinizing Chinese electric-vehicle battery and car parts supply chains for possible links to forced labor. Under the newly enacted Uyghur Forced Labor Prevention Act (UFLPA), the U.S. has banned the importation of goods made in Xinjiang, China, where the U.S. believes Chinese authorities have set up labor camps for Uyghurs and other Muslim minority groups. This could signal difficult times ahead for EV makers, who might be required to provide solid proof that their supply chains are free of any form of forced labor.
In a report to Congress last month on UFLPA enforcement, the U.S. Customs and Border Protection (CBP) listed several automobile components including lithium-ion batteries and tires among the “potential risk areas” it was monitoring. CBP data shows that 31 automotive and aerospace shipments have so far been detained under UFLPA since February of the current year. Detentions have soared from ~$1 million per month at the end of 2022 to more than $15 million a month currently. Last year, The New York Times reported that Chinese companies that produce raw materials for EV batteries show indications of using forced labor. According to NYT, mining conglomerate Xinjiang Nonferrous Metal Industry employs hundreds of Uyghurs as part of a so-called work transfer program. Beijing has acknowledged running such a program but denied allegations of forced labor calling them “a big lie.”
Two years ago, CBP banned U.S. imports of a key solar panel material from Chinese-based Hoshine Silicon Industry Co over forced labor allegations. The U.S. Commerce Department also restricted exports to Hoshine, the paramilitary Xinjiang Production and Construction Corps (XPCC), Xinjiang Daqo New Energy Co, a unit of Daqo New Energy Corp. (NYSE:DQ,) Xinjiang East Hope Nonferrous Metals Co, a subsidiary of Shanghai-based manufacturing giant East Hope Group; and Xinjiang GCL New Energy Material Co, part of GCL New Energy Holdings Ltd.
According to the U.S. Solar Energy Industries Association trade group, these bans were responsible for a 31% decline in installations of large solar energy facilities for utilities last year due to constrained panel supplies.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.